Norwood, Inc.purchased a crane at a cost of $80,000.The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation.The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017.

-Refer to the information for Norwood, Inc.
Based on this information, what method of depreciation will produce themaximum depreciation expense in 2016?

Question

Quizplus · Accepted Answer

The double-declining-balance method of depreciation will produce the maximum depreciation expense in the first year of an asset's life because it applies a constant rate (twice the straight-line rate) to the reducing book value of the asset each year, resulting in higher initial depreciation expenses compared to other methods.